OK, so it's not exactly "grim" up North for tech — But there are some issues

0

This is the first post in a series of three about the tech start-up community in the North East of England. It is the result of interviews with start-ups, investors and advisors over the course of this week. The interviews were conducted under Chatham House rules. You can watch a selection of on-the-record responses below:

To begin with, I was astonished by the vibrancy and diversity of the scene in Newcastle, particularly given its size. The city is awash with smart, talented people brimming with ideas, and some of the technologies being developed are awesome.

Here are a couple of stats about the area that Herb collected for his blog post:

Only London has a higher rate of tech start-ups than the North East

Of those firms that have started life in the North East in the past three years, 20% are using or selling technology which was not available a year ago. In Britain as a whole, the figure is 11%

NorthStar alone has invested £33m in more than 200 North East tech companies in just the past few years

The North East is home to 550 digital companies, employing 42,739 people (as of 2005)

On Thursday, I met around 30 start-ups of various sizes. I asked each of them a set of questions designed to eke out their opinion of the scene. Some of the answers were predictable; some educational; others shocking. (You’re going to ask me what was shocking, aren’t you? Well, I’ll tell you – but not until the second post in this series, when I’ve had chance to get a few more people on the record about their experiences. Here’s a clue, though.)

As I wrote before, not only are the best companies in the North easily as good as those in London, but the North has everyone beaten on gaming. It’s also worth pointing out some of the other benefits of starting out up here: dramatically lower costs, for example. And sometimes the North East is a better choice for certain types of business: Paul Campbell told me that of the five businesses he’s started, one failed because it was in London and one succeeded because it wasn’t.

So what did I get right, and what did I get wrong?

In my Telegraph article, I said that Northern cities were not well networked internally. That was wrong, at least in the case of Newcastle: monthly get-togethers like ThursdayFizz (for creatives), organised by Quick.tv‘s Matt Moran and Orangepanda‘s Stuart Howard, and Ross Cooney‘s Super Monday (for the geeks and suits) are at least as well-organised as the OpenSoho or DrinkTank events in London. Codeworks, spoken about in almost Messianic terms by many entrepreneurs, does a great job too. Their summer party on Thursday night was brilliant and their events and services to companies are widely praised.

I said that Northern entrepreneurs really need someone to fight their corner in London. That’s true. The South-centric London media is failing to report adequately on what happens north of Watford. The various tech scenes around the North aren’t getting sufficient attention from the public (which means fewer potential customers) or the industry (which means fewer potential investors and advisors). We need to do a better job.

I also said that large amounts of public money were being administered badly, by people with little experience of the technology industry. It’s probably more accurate to say that money is often administered questionably, by people with insufficient experience in what makes a successful business. Five of the 30 entrepreneurs I met told me of frustrating experiences with public sector chequebook-holders who didn’t “get” what the business was, but gave them money anyway. That’s fortunate for them, but it’s certainly not the “sustainable economic development” that the regional development agencies are there to promote.

Finally, the subtitle of my piece said: “Companies in the North of England still suffer from a lack of expert advice and connections, despite some great ideas.” I stand by that. The problem is most acute with younger, less experienced entrepreneurs, who are being let down by an infrastructure that chucks cash at them without providing an adequate support network.

Even with a close-knit community and ready access to successful older business owners, many of the younger start-ups I’ve met this week aren’t getting the sort of hard-nosed, expert advice about business development or about the commercial viability of their products that’s available in London or the West Coast of the U.S. – the sort of tough love that’s dished out by private equity firms and hard-bitten serial entrepreneurs, to whom failure matters. As a result, there are some horribly flawed products and business plans flying around. Frankly, it’s alarming that some of these ideas are getting funding. (I’m not going to call anyone out at this stage, so don’t ask.)

Here’s the thing about true entrepreneurs: they bounce back. Tear up their latest, greatest idea -demonstrate to them why it’s not viable – and they don’t throw themselves off the Millennium Bridge; they come back the following month with something better. You don’t need to fund businesses that you know won’t fly (and I’ve heard evidence of that going on), even – perhaps especially – in the name of regional development.

Funds in the North East (so far, I’ve only investigated Newcastle, so can’t speak for the other regions) aren’t doing anyone any favours by bankrolling – in some cases quite lavishly – bad ideas. The last thing the region needs for genuine, long-term economic health is a generation of think-they-can-dos whose estimation of their own success is based on whether they got that mythical £60k. Particularly because, from what I heard this week, it isn’t that difficult. In fact, getting cash seems to be the major indicator of success for many businesses in Newcastle. As Michael Birch pointed out earlier this week, that’s utterly wrongheaded.

I’m not saying that less money should be spent up here – maybe more should – but it needs to be spent more intelligently. Throwing cash around isn’t working: broadly speaking, the Angel networks aren’t growing and VCs from outside the region aren’t investing here. In other words, there’s no healthy entrepreneurial ecosystem springing up.

To put it bluntly: what’s going to happen when the EU money dries up? Because it will. If what I heard this week is correct, that could happen in less than two years. Then there’s the probable incoming Conservative government to factor in. It’s horrible to think that such eye-watering expenditure will have been for nothing.

One NorthEast and the organisations it funds are trying something pretty audacious: they want to artificially manufacture an entire industry. But the problem is, too few people seem to have any idea how to measure their success. They simply don’t know if it’s working or not. From what I’ve seen so far, it isn’t.

So what do we do?

Here are a few ideas off the top of my head. I’ll be adding more to this list in Parts Two and Three of the series.

(1) Creating connections to the other regions in the North is laudable and necessary, but it’s not enough on its own. Those with experience in the North East need to forge connections with London, Silicon Valley and perhaps Berlin too. The scale of what’s being attempted here needs to matched by similarly bold thinking. There’s such little precedent for this kind of project that no amount of expert advice can be too much.

(2) I’m going to go out on a limb here and say that there’s a huge PR problem for tech communities throughout the North. Inaccurate misconceptions, based on little more than North-South prejudice, do persist in the South (prior to this trip, guilty as charged). Angels and venture capitalists aren’t immune to such prejudice. So why not invite more journalists up to see the best of what the North has to offer? More eyeballs on what’s happening in the regions can only be a good thing. I daresay this does happen. Let’s invest in more “missions” down South.

(3) Let’s get smarter about how we’re spending public money. Why not finance more trips to Silicon Valley? Hire some biz dev experts to coach young entrepreneurs? Run more conferences like the excellent Thinking Digital? What about a dedicated “London liaison officer”? Forgive the cliché, but the possibilities are endless.

(4) The scope and activities of organisations like The Entrepreneurs Forum need to be massively increased, and more talent and expertise from outside the region needs to be brought in to give support to start-ups as part of a systematic program of education.

To round up

It’s tough to get anyone to speak on the record about all of this, since almost everyone depends in some way on each other and on the public bodies that run the show, but I’ve been grateful for some raw honesty, particularly after the hostility generated by what I wrote in the Telegraph.

Some of the anger, I freely admit, was completely justified. I would say, though, that the further up the food chain in Newcastle I went, the more I found reactions like “I don’t disagree, but perhaps you could have been more diplomatic,” rather than “OMG! Outrageous! How dare you! What crappy journalism!”

On Wednesday night, thinking I was about to get lynched, I was thinking twice about the trip. That was dumb: in the event, even Paul Smith gave me a hug.

The enthusiasm and talent of the entrepreneurs I met this week took me by surprise. They really, really want to get it right (they just don’t know how yet). I had a great time learning about their experiences and trying to aggregate dozens of opinions into a coherent argument about the state of play in the North East.

Then again, it wasn’t all plain sailing: within five hours of arriving into Newcastle, I’d had my wallet stolen – cash, credit cards, train ticket, the lot. But since this was a trip about dispelling prejudices rather than reinforcing them, I kept relatively quiet about it and promised my host I wouldn’t mention it in my write-up. Whoops.

In Part Two, I’ll be investigating the quality of institutional support and resources available to start-ups in the North East, and whether some well-intentioned development programs are doing more harm than good to the local digital economy.

Personally, I’m working on projects for which I’d prefer not to seek external financing.

If the product or service you’re looking to create is good enough, and the vision allows others to jump on the band wagon for appropriate equity incentives, then why asks for money so early on?

Too many people write business plans with the intention of VC to fuel an idea that they haven’t even taken off the starting blocks.

http://www.wraycomcom.org.uk cyberdoyle

Any funding available should be spend on the infrastructure up t’north, then the entrepreneurs can deliver the goods. RDAs seem fixated by funneling funding through business link to justify the existence of an org that doesn’t really do anything useful. Give people the tools to do a job and they will deliver. The main tool for an active digital economy these days is a ubiquitous broadband connection delivering what the people need. Currently what we have in the north is bad, due to bottlenecks in the legacy victorian copper. Get the fibre lit to the north and see what it does with it.

http://www.tfc-training.com Lloyd Sewell

Hi

Excellent article and project – maybe you could do the same for all the other RDA – you may find that the NE is not the only place suffering from a chronic lack of connected thinking and planning.

Although I live in the Southeast, I have been fascinated by the attitudes of the people of the Northeast.

As I am also looking for inspiration in my own project – I am look forward reading to the remaining articles.

Regards and much success.
(PS) – hope you did not have to walk back to London. (LOL)

LS

Milo Yiannopoulos

> maybe you could do the same for all the other RDA

I plan to. Where would you guys recommend I go next? Manchester? Liverpool?

http://1daylater.com/ David King

Aye, it was great to meet you on Thursday, really looking forward to seeing the final cut of the video :)

—

One of the things that we didn’t really discuss was that the additions to the support infrastructure is being created at the moment, the following initiatives are relatively new but show immense promise:

Teeside Digital City – intense incubator system with a view to eventual business development

Newcastle, Northumbria & Durham Entrepreneurs societies – previously these universities have had no such society, but each is working to rectify the situation

Codeworks – is godfather to many digital companies with ties to funding, but more importantly, working support and networking opportunities, although well established, the networking is coming into a class of its own

—

Also, I like the idea of Northern embassies in key locations… things to ponder

Gill Helfer

So how did you research your original article, if not by visiting the north east and talking to digital entrepreneurs there? I’m a little baffled.

http://blog.alexguest.me Alex Guest

Intelligently written and illuminating. I had no idea there was a tech scene beyond the end of the northern line, let alone a vibrant one: I look forward to parts two and three.

http://rob@tipstar.co.uk Rob Mathieson

Much better Milo. Articles like this will hopefully draw the attention of the VC community.

Congrats on the new job as well.

http://www.internetsubtitling.com Rob Colling

Now *that* is the fair, balanced article that was clearly bursting to get out from behind all the “grim up north” nonsense. Bravo.

It was great to meet you, and it’s even more great to see your degree of commitment and involvement on this. I’m looking forward to the next two articles, and to seeing their effects.

http://neverodd.co.uk Paul Smith

Have you learnt nothing Milo? Nobody would top themselves jumping off the Millennium Bridge – it’s barely the height of a first floor window. You’d plump for the Tyne Bridge every time. Honestly.

Completely agree with Rob – I know you were looking to stir up debate with your Telegraph piece, but you’d have done a far more effective job with a thoughtful, balanced post like this. I don’t think anybody had an issue with the overall message of the original post, more that it was deliberately offensive and poorly researched.

Two points I would question – the stereotype of a city brimming with wallet-thieving scallies belongs to Liverpool, not Newcastle.

And I don’t recall the hug.

http://yiannopoulos.net/2009/07/come-and-have-a-go-if-you-think-youre-hard-enough/ » Come and have a go if you think you’re hard enough @yiannopoulos

[…] Two of my series for TechCrunch Europe on tech start-ups in the North East will look at the quality of institutional support and resources available to start-ups, and whether […]

Milo Yiannopoulos

If you’d like to contribute toward the research I’m doing for Part Two, please read this:

The fact you kept your word and visited us here on our doorstep, face to face, when many would have bottled is admirable. It would have been easy for you to have stayed hidden away in the London scene and therefore not allowing us an opportunity to change your perception.

A much fairer and accurate assessment of the North East’s Tech/Digital scene Milo. I hope the remaining two articles are as fair and well researched as this one.

P.S. In regards to your wallet theft, I had my laptop stolen in Shoreditch, Central London two months ago. These things happen everywhere not just in the North East.

http://www.davidcoxon.com david coxon

Fantastic article – and an entirely different story to the “grim up North” piece.

It obviously much more well researched and well written, its fair, balanced and makes some very relevant points…but makes them in a positive way.Nice work.

I can’t wait to read the second and third parts – although getting people to go on the record on issues of mismanaged funding and well meaning organizations being more of a hindrance than a help will be a lot harder to get i fear.

It is great to see that the London and other regional audience are also joining in the conversation, knowing the North East Tech community, i knew that you’d get lots of great comments and replies to your article, but i’ll be interested to see how other regions compare. I hope that you get the chance to visit places like mid wales, the midlands, cumbria or norwich and report back on how those areas compare.

http://www.inkspotscience.com Jo Berry

great piece Milo, so sorry that I couldn’t come see you but (honest!!) I had to go see a man about some inet!estment, and he came first…..looking forward to parts 2 and 3. One comment (and honestly not in a flag-waving strident dungareed sense) where the heck were all the women?

As COO of a sci/tech company myself I want to ask all Girl Geeks of the North East to get in touch with Milo; in fact, here’s an invitation: the next official meeting of Girl Geeks NE is 10 September at Newcastle University Business School – consider yourself invited. Let me know if you want to come along.

J

Janet E Davis

We do try to get ‘national’ (mostly London- & South East-based) journalists interested in our exuberant digital scene and successes in the North East. They tend to ignore.
‘Missions’ to the South are probably less effective than dragging Southerners (kicking & screaming in true stereotypical soft Southerner fashion?) up to the North East to experience our unique, friendly & lively environment.
Please do check on facts, Milo. Newcastle is small compared to London, but it’s still one of the largest UK cities all by itself, and is part of the very large Tyneside connurbation etc. We’re not as provincial as some Londoners appear to be.

http://uk.techcrunch.com/2009/07/27/calling-all-north-east-tech-start-ups-can-you-help-us/ Calling all North East tech start-ups: can you help us?

[…] Two of our series on tech start-ups in the North East of England will look at the quality of institutional support and resources available to start-ups, and whether […]

http://sharemyplaylists.com Kieron

Good article Milo and a very well put together video. To be brutally honest your original piece in the Telegraph didn’t offend me. However I was really impressed that you took the time out to make a trip to the North East to meet some of us involved in the tech scene. I’m really looking forward to your next two pieces and am also very happy with the debate this has stimulated.

http://www.knowledgeit.co.uk Andy Walton

Milo

I must say that I thought that the admission of “OK, so it’s not exactly grim up North for tech”, was a great move forward.

I thought that it was a good article and I await the next in the series, as with many others I’d be keen to understand how you feel, the North East compares in relation to the other RDA regions.

I do think that this article will help show that there is a real opportunity in the North East for tech companies, and those who want to get involved with those companies, either via investing or by creating partnerships.

I know that the Codeworks Connect Board members, and Staff, were pleased to see that you were prepared to visit the North East and see first hand what is actually happening in the region.

I’d be happy to help introduce you to other RDA’s if this helps.

Regards

Andy

http://www.newsjacker.co.uk/media/calling-all-north-east-tech-start-ups-can-you-help-us/ Calling all North East tech start-ups: can you help us?

[…] Two of our series on tech start-ups in the North East of England will look at the quality of institutional support and resources available to start-ups, and whether […]

http://connectnortheast.com CONNECT North East

Milo

Good to meet you at Close House last week.

I am leaving this comment on behalf of CONNECT North East “which brokers introductions between young technology companies and investors”.

It is administered / run by a private company, and is putting on a ‘Meet the Investor’ event this lunchtime (the first in this series).

We believe we are part of just the sort of solution you suggest, and would be happy to tell you more.

Kind regards

Justin Souter

http://www.thinkingdigital.co.uk Herb Kim

Milo,

Greetings again.

First off thank you for coming back to the issues you raised in your original Telegraph piece.

My reaction to this post is summed by one word: balance.

This piece highlights the positives & achievements but raises some very hard & fair questions.

You suggest that advice & support is significantly worse than what they might get in London or California. Can you actually prove this or is it just your impression? I’m genuinely curious here. I find it hard to believe that ALL the advice being given to NE startups/companies is terrible or at least subpar to what you could get in London or California. And of course alot of London & California-grown advice can be spectacularly wrong too. Dotcom crash, banking crash, etc.

You suggest also that NE VC organisations like NorthStar are lavishly funding bad ideas. Again, is there a way to prove this? As you’ll undoubtedly know mainstream VC’s & Angels are typically only looking for 1 or 2 hits out of 10 which means the vast majority of their investments are lavishly funded bad ideas or incompetent executions of good ideas. For every Google there are hundreds of boo.com’s & thousands of walking dead firms that never amount to much even if they survive for awhile.

I guess what we’d all find valuable is a way to try & measure the performance of at least parts of the public investment being made here in this region and others.

Anyway I applaud this new piece and look forward to your further work on the NE and the other English regions.

Herb

TrueIT

To be honest I agree with Milo’s articles in spite of being a businessman born and bred in the North East, unless your ‘in bed’ with One North East, Business Link, NorthStar or any of the other so called ‘investors’ for the ‘good’ of the region then you don’t stand much chance. Understandably and unfortunately not every company is going to succeed but surely the ratio for VC/Equity etc must be dramatically improved to ensure more out of the 10 or 200 – whatever the figure maybe – SUCCEED

On another note Codeworks was handed it on a plate by One North East from day 1 to date and to be fair you have not done that much neither for the North East apart from waste tax payers money, use it for jollys and to take on so called IT professionals “laughs”… If you can convince me that any of the above investors and their ‘starts ups’ have had success with the copious amounts of ‘public’ money they have received then I will hold my hands up. More should be done to ensure more success stories for the North East to justify the spending before Mr Cameron decides to abolish the RDA scheme altogether.
GRD Grants in the North East are a waste of time, If you face does not fit with the fat cat investors or one of the few companies in the know about the region’s ‘pots of money’ that is being wasted then you might as well try your luck in London or the south east….

After watching the video above regarding the meeting with Milo in Newcastle last week, I thought we have spotty IT so called ‘pros’ that all they do is suck up to One North East.

and well done Paul King for being so honest in the video by not talking rubbish and telling it how it is….

Pure a$$ licking CodeWorks for the benefit of One North East.

A suggestion, One North East needs to study where the money is going i.e. meet the companies and mentor them directly – or use mentors who are not rejects from their own industry failures who can be over paid by doing little to support companies before they retire! Maybe then we might get even more success for the region if the money is not distributed to donkeys who are also rejects from banking industries or accountant firms and no other hope in getting a job to sustain there wigs and cigars ;-)

[…] the discussion around Milo Yiannopoulus ‘grim up north’ post for the telegraph and his follow up for Tech Crunch, there are already calls for some form of debate to discuss how we as a region can […]

http://newmediamonthly.co.uk/2009/08/03/ok-so-it%e2%80%99s-not-exactly-%e2%80%9cgrim%e2%80%9d-up-north-for-tech-%e2%80%94-but-there-are-some-issues/ OK, so it’s not exactly “grim” up North for tech — But there are some issues « new media monthly

[…] by Milo Yiannopoulos on July 25, 2009 Posted in Articles […]

http://www.orangebus.co.uk Julian Leighton

I have to raise an issue with you mentioning the wallet theft in your article. Can you let us know what happened?

As far as I am aware the wallet was in your laptop bag, and someone took it from there. So, where were you while someone was rifling through your bag? Why didn’t they take the whole bag (including laptop) which would have been quicker and probably less suspicious?

I’m not saying you didn’t have your wallet taken, but before you mention this as an obvious side swipe at the area, I’d like you to back it up with some more facts. I’ve drank in the pub where it allegedly happened for years and never had anything stolen, but then I’m usually fairly aware of the proximity of my valuables, wherever I am…

For what it’s worth, I’ve enjoyed this article and I’m delighted you came to the region to actually research the facts on this occasion.